"According to Standard & Poor's, the dividend component was responsible for 44% of the total return of the last 80 years of the index." Note graphs. Worth further research. http://www.simplestockinvesting.com/SP500-historical-real-total-returns.htm
Thank you for the link. This is critical knowledge for any long term investor in stocks. I have referred to this data in these forums many times. I had another link to the same data but in slightly different form, and that data covered the entire twentieth century and beyond. Unfortunately I have lost that link and could not locate it with a Google search, except possibly on a pay sight I located. I note that if dividends are removed, after inflation, the total return since the mid seventies is roughly that of UST's. Even allowing for the constant dollar return of UST's being still lower, the investor in non-dividend bearing stocks has taken on way too much risk for the return. The only way to justify the risks is to include dividends. Several more things can be noted. One is that on the century plot, the profound changes after Bretton Woods was abandoned are obvious. In the present chart this is noted by the change in slope occuring approximately by the late 1970's. This is due to adoption of a fiat currency and consequent increase in the average inflation, which is subtle at times and dramatic at others. Prior to fiat currency, and especially in the 19th century, there were were short periods of mild deflation interspersed among periods of mild inflation. However at that time the gold standard held both debt and inflation in bounds as there was a direct link between issue of currency and it's buying power. Nowadays, there is only an indirect practical limit linked to productivity and demand but no statutory limit (other than the temporary ones that are constantly revised upward.). Consequently the popularity of borrowing, especially with an ever more accommodating Central Bank in the background, has grown as politicians have realized that with a fiat currency the downside of borrowing may not be so immediately recognized, and monetizing debt may be made more subtle. They also are aware that the average citizen does not comprehend the link between deficits and inflation; thus borrowing, although railed against in populist movements, (we see it today in the Teaparty) is still far more acceptable than higher taxes. Joe the plumber understands borrowing and direct taxation; what he doesn't get is monetization and inflation. Thus the modern politician will borrow and spend, as it is perceived as a lesser evil than taxing and spending. And of course not spending is out of the question. In spite of the rhetoric, true fiscal conservatism among politicians of all parties can not exist in today's political climate. That is why, of course, military bases could only be closed via the binding decision of an independent commission; not by the congress directly. Spending, borrowing, taxing --Joe rails against all three. But reduce his portion of the public pie and watch him scream even louder. Joe doesn't understand that, in the end, inflation via monetization --about which he is ignorant-- and direct taxation --which he understands well -- can amount to essentially the same thing, the only difference being the way they are distributed among the population. Finally let me note that it is rather obvious what to do. And that is to invest only in the choicest dividend bearing stocks of the most stable growing economies around the globe, and reinvest all dividends. This points out a defect in Bogle's recommendation of index investing, because indexes include non-dividend bearing stocks as well. Thus his approach should be modified as above. If one does that, then total returns should exceed those of the S&P, with dividends included, by a significant margin. Many times in this Forum I have pointed out these, seldom trumpeted by Wall Street, but fairly obvious facts, and always there has been some backlash from traders who just don't get it when it comes to long range investing, such as in retirement plans. Usually they will point out how much they made buying AAPL, or such, but of course, when you are talking about risk adjusted return over 35 years, such cherry picked comparisons with the benefit of hindsight are not relevant; nor is it reasonable to expect most retirement accounts to be actively, and skillfully traded.
A major problem could be taxes. My accountant didn't think Futures and stock income can be netted against each other. Say the market is up 35% as a whole. Even if you made ~40% on stocks, you end up paying 35-40% in taxes, you would end up down money. So check with your accountant first.
How did you come up with 4 contracts? I can think of the following scenario: Market surges and your stocks plunge. IB has to sell stock intraday to cover margin. If this happens a few times, you can lose 10% too 20% right there. Does anyone know if long stock can be used as collateral with IB and not liquidated intraday to cover margin?